There’s been a lot of bad news this year.
In particular, retirees have taken two big hits to their income.
Falling interest rates minimize what you can earn from your savings account.
And a surge in dividend cuts has made it more difficult to generate income from your investments.
But despite the bad news, there are some very encouraging side effects of these two trends.
It’s sort of like the idea that when one door closes, another one opens.
And today, I want to take the time to show you how to turn seemingly bad news for your retirement into a driving force that will actually boost your wealth.
Let’s jump in!
Dividend Cuts Heighten the War on Savers
The war on savers has been raging for quite some time now.
The Fed’s policy of low interest rates makes it extremely difficult to make money from savings accounts, treasury bonds, and other traditional sources.
This creates a big challenge when you’ve worked your entire career to set money aside for your retirement. Because if you can’t generate income from your nest egg, it’s easy to slowly erode your wealth by spending the capital you’ve worked so hard to set aside.
And the coronavirus crisis has led to another assault on savers.
With many companies seeing profits dry up or experiencing losses, corporations have had to cut back on dividends they pay investors. That’s unfortunate because dividend income has become one of the few reliable sources of cash flow for retirees!
Take a look at the surge in dividend suspensions and dividend decreases retirees have had to face this year.
If you own some of the stocks that have cut their dividend, you’ve probably felt the pain in your wallet.
You’re not receiving as much cash for your investment as you were before, which is incredibly frustrating!
Fortunately, there’s another side to this investment coin — one that can help you grow your wealth while still collecting reliable income.
Economics 101: Low Supply Leads to Higher Prices
If you spend any time studying how the economy works, you’ll undoubtedly run into the concept of the supply curve.
The basic idea is that if there’s less of something people want, people will pay more for it in short supply.
It makes sense when you think about how this works.
When there’s not as much of something available, people will pay more to own the scarce resource.
We’re seeing that play out in the housing market right now. As buyers scramble to purchase a dwindling supply of homes for sale, home prices are surging higher.
And that same thing happens in the market for income stocks…
When a large number of companies cut their dividends, it means fewer companies are paying reliable income to shareholders.
And since the number of investors who need that income is still high, investors will
pay more for stocks with reliable dividends.
That’s happening right now in the market!
Companies with stable businesses that continue to pay dividends are becoming more valuable.
The price of their stock shares has been trending higher. And that’s because investors are flocking to a smaller selection of stocks that can keep paying dividends.
Here at Rich Retirement Letter, we’ve been profiling those stocks week in and week out.
That’s because it’s my firm belief that dividend stocks are a great way to boost your wealth regardless of what’s happening in the economy.
They’re just a great foundation for generating income and building wealth — in good times and bad.
And in today’s environment, reliable dividend stocks are even more valuable.
That’s because there are fewer income opportunities available to investors. And so the opportunities that are in play trade higher.
So please, consider investing a meaningful amount of your retirement wealth in today’s dividend stocks that continue paying their shareholders.
If you do, I expect you to both collect reliable dividend payments and see your wealth grow as the share prices trend higher.